Originally Posted by
SWBKCB
I wouldn't have thought the value of the business is going up at the moments.
This from the Irish Independent...Connect Airways, the holding company behind Dublin-based Stobart Air, which operates the Aer Lingus Regional service, has fallen into administration in the UK, the Irish Independent has learned.
The move is linked to the recent collapse of Flybe. UK-based Flybe was also part of Connect Airways.
The administration means that accountancy firm EY now controls Connect and 49pc of Stobart Air. The other 51pc of Stobart Air is owned by its more than 400 staff.
Connect Airways is 30pc-owned by the listed UK Stobart Group. Virgin Travel Group, a subsidiary of Virgin Atlantic, also has a 30pc stake, while US firm Cyrus Equity Partners owns 40pc.
Yesterday, Stobart Group, whose CEO is Warwick Brady, warned investors that it’s evaluating how to manage liabilities it has to Stobart Air.
But with confirmation to the Irish Independent from EY that Connect is in administration, it means Stobart Group is now on the hook for guarantees given in relation to a number of aircraft leases.
A subsidiary of Stobart Group, Propius, engineered a sale and leaseback of eight ATR turborprop aircraft to German firm Goal in 2017. The aircraft are used for the Aer Lingus Regional service. Lease agreements under the deal total $15.4m a year and are for 10 years, it was reported at the time.
There’s an option to terminate the agreement in 2023, although the trading update issued by Stobart Group yesterday suggests that the guarantees could be significantly more material.
The current Aer Lingus Regional franchise agreement Stobart Air has with Aer Lingus ends in 2022.
Propius received $62.7m from the sale of the aircraft, according to reports when the deal was done. However, it’s unclear where those proceeds ultimately ended up following the creation of Connect Airways in 2019.
In a statement to the Irish Independent today, EY said:“Alan Hudson, Joanne Robinson, Simon Edel and Lucy Winterborne of EY’s Restructuring team were appointed joint administrators of Connect Airways Limited on March 10, 2020,” it said.
“Owned by a consortium of companies, Connect is a holding company that was set up in January 2019 to assist with the acquisition of the airline Flybe. Connect has no day-to-day trading operations itself.”
This is not great news for the owners of SEN. They have no cash available to them, no operating income due to CV, and now the administrators of Connect will be chasing them for the lease payments for the six ATRs totalling £150m over the next 10 years.
The Stobart share price has tanked meaning that they have little recourse to sensible debt options and the mortgaged Eddie Stobart shares are currently worthless. The leases and the ESL mortgage add up to £200m worth of liabilities.
I dont believe the airport is worth anything like the £800m quoted in the press; that now seems to have been an "accidently" leaked story to reassure investors and the Connect administrators. Airports sell for a multiple of EBITDA earnings and whilst the results are not yet out, I'd wager EBITDA is either zero or no more than £1-2m.
We could be witnessing the beginning of the end of Stobart's ownership of Southend Airport.